Recovering Attorney Fees in Declaratory Judgment Actions

by | Feb 25, 2022 | Litigation & Local Counsel

A declaratory judgment is one that simply declares the rights, status, or other legal relations of the parties without ordering anything to be done. A declaratory judgment claim can be useful in a wide variety of circumstances. In a proceeding under the Texas Declaratory Judgments Act, the court has discretion to award costs and “reasonable and necessary” attorney fees, so long as the award is “equitable and just.” A court can award fees to any party, even a losing party.  

Under the Texas Declaratory Judgments Act (UDJA), a person interested under a deed, will, or contract, or a person whose rights, status, or other legal relations are affected by a statute, city ordinance, contract, or franchise, may have determined “any question of construction or validity” concerning the instrument and may also “obtain a declaration of rights, status, or other legal relations” under the instrument.

A declaratory judgment claim can be useful in a wide variety of circumstances. For example, a craft brewery can file a lawsuit against the Texas Alcoholic Beverage Commission, seeking a declaration that its interpretation of a statute is correct and that TABC’s interpretation is not. Or a property owner can file a lawsuit against an easement holder to determine easement rights over a disputed area. In any case, there needs to be a present dispute between the parties—a justiciable conflict that the court can resolve.

Section 37.009 of the UDJA provides that:

In any proceeding under [the UDJA], the court may award costs and reasonable and necessary attorney’s fees as are equitable and just.

The court has discretion to award attorney fees to any party (even a losing party) or no party. Because of that risk, a party seeking a declaration under the UDJA should be mindful of the possibility that fees could be awarded against it, regardless of the outcome of the case.

You can’t recover attorney fees under the UDJA if the claim for declaratory relief merely duplicates or repleads an existing claim or is only incidental to other claims for relief. In other words, don’t add a declaratory judgment claim just so you can recover attorney fees. For example, a court refused to award fees under the UDJA when the plaintiff’s claim for declaratory relief was merely tacked on to serve as a basis for fees and duplicated the issues litigated under a separate trespass claim.[1]

Four requirements for award

There are four requirements for an award of attorney fees under the UDJA. Awarding fees must be (1) equitable and (2) just, and the amount of attorney fees must be (3) reasonable and (4) necessary.

Whether a fee award is equitable and just “‘is not susceptible to direct proof but is rather a matter of fairness in light of all the circumstances.’”[2] For example, in Hartzell v. S. O., 613 S.W.3d 244, 259 (Tex. App.—Austin 2020, pet. filed), the Austin Court of Appeals held that the trial court acted within its discretion in denying a graduate’s request for attorney fees in her ultra vires claim that university officials acted outside the scope of their legal authority. Litigation had been ongoing for several years, and the graduate prevailed in significant and meaningful respects, but the trial court noted that the legal question presented was both novel and difficult and that both sides were justified in pursuing their competing positions. Under the circumstances, the trial court found it was equitable and just for each party to bear their own attorney fees and costs.

Texas courts of appeals have used the “lodestar method” to determine what fees are “reasonable and necessary” in UDJA cases.[3] To determine the lodestar, a court must determine the reasonable number of hours expended by the attorney and the reasonable hourly rate for the attorney. The court then multiplies the number of hours by the hourly rate. The lodestar is intended to reflect the prevailing market rates in the relevant community. When the attorney is working on contingency or a fixed fee, the party must still offer evidence that the fees were reasonable and necessary under the lodestar method. Expert testimony will generally be needed to prove that the rate claimed for purposes of the lodestar method reflects a reasonable market rate.

Recovery of fees in declaratory judgment action involving an administrative rule

The Texas Administrative Procedures Act (APA) authorizes declaratory relief when determining the “validity or applicability” of an administrative rule, if it is alleged that the rule or its threatened application interferes with or impairs, or threatens to interfere with or impair, a legal right or privilege of the plaintiff.

The APA does not authorize recovery of attorney fees in a declaratory judgment action.[4] When a plaintiff files a proceeding that only challenges the validity of an administrative rule, the parties are bound by the APA and may not seek relief under the UDJA, because such relief would be “redundant.”[5] However, when the declaratory relief sought is more than a declaration concerning the validity of a rule, the party seeking declaratory relief is entitled to seek relief—and attorney fees—under the UDJA.[6] 

For example, a plaintiff might challenge the validity of an administrative rule under the APA, claiming it is voidable because it was not adopted in substantial compliance with the APA. If that was the only claim, the plaintiff could not recover attorney fees, because the APA doesn’t authorize recovery of fees. If the plaintiff also had a declaratory judgment claim under the UDJA that government officials exceeded their statutory authority in adopting and enacting the administrative rule, then the plaintiff could potentially recover attorney fees under the UDJA.[7]

Generally no recovery of fees in federal court under federal Declaratory Judgment Act

While the Texas Declaratory Judgment Act expressly allows recover of attorney fees, the federal Declaratory Judgment Act does not. An award of attorney fees in a federal declaratory judgment action is confined to two situations: (i) where fee-shifting congressional legislation applies and allows a prevailing party to recover fees; or (ii) where controlling substantive law permits recovery.[8]

If a party files a declaratory judgment action in state court that is later removed to federal court, the removal effectively converts the state court declaratory judgment action to one brought under the federal Declaratory Judgment Action.[9] The parties can’t rely on the Texas Declaratory Judgment Act in federal court to recover attorney fees, because it’s a procedural statute, not controlling substantive law.[10]

The exact circumstances of every case are different, and you should consult an experienced attorney for advice specific to your matter.

[1] Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620, 625 (Tex. 2011).

[2] Bailey v. Smith, 581 S.W.3d 374, 398 (Tex. App.—Austin 2019, pet. denied) (quoting Ridge Oil Co., v. Guinn Invs., Inc., 148 S.W.3d 143, 162 (Tex. 2004)).

[3] Schwendeman v. BT SFRL I, LLC, No. 02-19-00007-CV, 2020 WL 479592 (Tex. App.—Fort Worth Jan. 30, 2020, pet. denied), reh’g denied (Mar. 12, 2020), reconsideration en banc denied (Apr. 2, 2020); Bailey, 581 S.W.3d at 397.

[4] See Tex. Gov’t Code § 2001.038; Tex. State Bd. of Plumbing Examiners v. Associated Plumbing-Heating-Cooling Contractors of Tex., Inc., 31 S.W.3d 750, 753 (Tex. App.—Austin 2000, pet. dism’d by agr.).

[5] Patel v. Tex. Dep’t of Licensing & Regulation, 469 S.W.3d 69, 79 (Tex. 2015).

[6] Howell v. Tex. Workers’ Comp. Comm’n, 143 S.W.3d 416, 443 (Tex. App.—Austin 2004, pet. denied).

[7] John Gannon, Inc. v. Tex. Dep’t of Transp., No. 03-18-00696-CV, 2020 WL 6018646, at *3 (Tex. App.—Austin Oct. 9, 2020, pet. denied).

[8] LMV-AL Ventures, LLC v. Lakeway Overlook, LLC, A-17-CA-272-SS, 2018 WL 3603108, at *2 (W.D. Tex. May 15, 2018) (internal citations and quotations omitted).

[9] Paso Del Norte Motors, LP v. Tri Star Partners, LLC, EP-15-CV-33-PRM, 2015 WL 13778413, at *11 (W.D. Tex. Sept. 3, 2015).

[10] LMV-AL Ventures, LLC, 2018 WL 3603108, at *2; Mendez v. Transamerica Corp., CV H-11-2553, 2012 WL 13064115, at *2 (S.D. Tex. July 27, 2012).

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